3 Min Read
OTTAWA (Reuters) - Canada's economy stalled in October after four consecutive months of growth, pointing to a fourth-quarter slowdown as increasing global uncertainty mutes expectations for next year.
Statistics Canada said on Friday that October gross domestic product was unchanged from September, matching the forecast of analysts who cited financial turmoil in Europe and a troubled U.S. economy as factors slowing Canada's economy.
"The Canadian economy has already exhibited signs of domestic demand fatigue - household balance sheets are stretched and will likely keep consumer spending subdued," said TD Securities strategist Mazen Issa.
Analysts said annualized fourth-quarter growth was unlikely to breach 2.0 percent, well below the 3.5 percent recorded in the third quarter.
Issa said subdued U.S. growth and sluggish Canadian exports meant "the first half of 2012 is expected to be tumultuous" and predicted the Bank of Canada would keep interest rates low the entire year.
Canada's currency slipped after the data, weakening to C$1.0190 against the greenback, or 98.14 U.S. cents, down from about C$1.0183, or 98.20 U.S. cents, immediately before the figures were released.
Statscan said output of goods-producing industries fell by 0.2 percent in October from September, cancelling out a 0.2 percent increase in the services sector.
The utilities sector dropped by 1.5 percent on lower demand for both electricity and natural gas, while mining and oil and gas extraction were off 0.2 percent. These declines offset a 0.3 percent gain in manufacturing.
Retail trade grew by 0.6 percent, reflecting widespread gains, while the finance and insurance sector rose 0.3 percent on increased mutual fund activity.
GDP was up 2.7 percent from October 2010.
Even though growth stalled, a separate government report showed higher tax revenues helped Ottawa cut its budget deficit in the first seven months of the 2011-12 fiscal year to C$15.39 billion ($15.09 billion) from C$21.54 billion in the same period the previous year.
In October, an 8.1 percent jump in revenues meant the deficit fell to C$2.16 billion from C$4.11 billion in October 2010, the Finance Department said in a statement. Program expenses were down 3.2 percent.
Revenues in the first seven months of the year were up 5.7 percent, primarily reflecting higher income tax revenues. Program expenses were down by 0.8 percent.
The Conservative government says it will not be able to eliminate the budget deficit by 2014-15 as initially promised, and has pushed back the date for balancing the books by one year to 2015-16.
Ottawa now predicts the 2011-12 deficit will be C$31 billion.
Editing by Jeffrey Hodgson and Rob Wilson